The government has decided not to impose safeguards duty on solar equipment from China and Malaysia, overruling the directorate general of safeguards’ recommendation of a 70% levy that had delighted local manufacturers but alarmed developers who felt that the steep rise in input costs would make projects unviable.

The Delhi High Court disposed of a petition challenging the proposed duty after the government’s counsel said the directorate general of safeguards’ recommendation was not binding. The counsel showed the court confidential minutes of a meeting held by the standing committee on safeguards, which had decided not to impose the duty.

Anand Kumar, secretary, the ministry of new and renewable energy, confirmed there would be no provisional safeguard duty. “As of now there will be no duty,” he told ET.

“If it ever comes up in future, we will make sure the interests of all stakeholders are safeguarded,” said Kumar.

In the high court, Justices Sanjiv Khanna and Chander Shekhar did not comment on the merits of the petition by Acme Solar and said it should be treated “as a representation to the respondents before the final decision is taken by the Central government”.

The judges remarked that the minutes of meeting suggested that no imposition of provisional duty was likely, and that if any such step was taken, Acme Solar could approach the court again with a fresh petition. “This order would not foreclose the right of the petitioner to challenge any adverse order in accordance with the law,” the court said.

The development comes as a huge relief to solar developers, since over 90% of the equipment used in Indian solar projects is imported.

Acme Solar, in its petition, had claimed that imposing the duty would increase solar tariffs from around Rs 2.50 per unit at present to around Rs 4.50 per unit, which would render their business unviable.

India’s solar power capacity has expanded rapidly in recent years, led by big investments by companies such as ReNew Power, Tata Power, Hero Future Energies, Greenko, Acme Solar and Azure Power. Relatively cheap imported equipment has helped Indian solar power tariffs plunge to a record at auctions.

The DG of safeguards had made his recommendation following a petition from the Indian Solar Manufacturers Association (ISMA), which claimed to represent local solar manufacturers, maintaining that Chinese and Malaysian solar panels were being priced lower than locally made equipment. Acme Solar’s petition had questioned the legitimacy of ISMA as a voice of local industry, claiming that many of its members had their units in special economic zones.

Earlier Shapoorji Pallonji Infrastructure too had moved the Madras High Court against the DG of safeguards’ proposal, claiming it had not been given enough time to respond during the investigation, but the petition was dismissed.

Safeguard duty — as distinct for anti-dumping duty — can be imposed on a product for a maximum of four years if its import increases unexpectedly to the extent that this causes serious injury to domestic industry. Separately, the director general of anti-dumping and allied services, is also investigating whether anti-dumping duty should be imposed on solar imports.